On Friday, President Obama will once more revive one of his ol’ campaign-favorite memes and remind college-age and younger voters of what it is exactly the Democrats can do for them — besides, you know, engendering a sluggish economy with a youth unemployment rate of sixteen percent, but I digress. On the campaign trail last summer, the president spoke to younger crowds about preventing the interest rate on federally subsidized Stafford loans from doubling to 6.8 percent as a way of boosting the economy, and Congress sent up a one-year extension of of the 3.4 percent rate for him to sign — but the sand is about to run out on the extension come July 1st, so it’s obviously time for some more campaigning on how the GOP doesn’t care about young people, or something.
President Obama will urge Congress to halt an upcoming hike in student loan interest rates during an event with college students at the White House on Friday, White House Press Secretary Jay Carney said Wednesday.
“While we welcome that House Republicans have paid some attention to this issue this year, their proposal unfortunately does not meet the task,” Carney said at the White House press briefing. “The president will call on Congress to pass a solution that truly helps keep college affordable for middle class families and students.”
In case you missed it, the GOP has indeed ‘paid some attention’ to the issue this year; just last week, the House passed a bill that proposed to — quelle horreur — tie future rates to the market instead of allowing the federal government to artificially manipulate the market with an arbitrarily determined rate, but it’s going nowhere in the Democratic Senate and our esteemed president has already issued a veto threat.
The bill was approved on party lines, 221-198. Senate Democrats oppose the bill and the White House issued a veto threat on Wednesday, so its prospects are dim. Democrats want to extend current rates for two more years to allow more time to find a permanent fix. …
The House Republicans’ proposal would tie loan rates to the interest rate on a 10-year Treasury note, plus 2.5 percentage points, with a cap that would prevent the interest rate on Stafford loans from rising above 8.5%. President Obama’s budget called for setting the rate at slightly less than 1 percentage point above the Treasury note rate.
The GOP plan would also reset the loan rate for all borrowers every year based on market fluctuations, while under Obama’s proposal, any borrower’s initial loan rate would remain fixed for the life of the loan.
Of course, allowing even just a partial return to free-market economics in any sphere is rarely the Democrats’ game, as established niche benefits once relentlessly seized upon as campaign tools are not to be relinquished — so it’s back to the drawing board on that one, nevermind that all of this manipulation and flooding the market with artificially cheap loans isn’t doing students nor anyone else any favors in the long run. Total U.S. student debt has already surpassed a whopping $1 trillion, and student debt delinquency rates are getting seriously alarming, Bloomberg reports:
Overdue student loans reached an all-time high as students struggle to find work after college, according to a government report renewing alarms about the rising burden of higher-education debt.
Eleven percent of student loans were seriously delinquent — at least 90 days past due — in the third quarter of 2012, compared with 6 percent in the first quarter of 2003, according to the report by the U.S. Education Department. Almost 30 percent of 20- to 24-year-olds aren’t employed or in school, the study found.
Of course, I’d imagine the president will use these figures as reasons why student loans need to remain cheap — i.e., we need to make sure students can afford to pay their loans back and help them out during this rough economic time — except that his proposed policy will do nothing to help fix the problem of an overcrowded and inhibited market that perpetuates the notion that a four-year college degree is the best route for the greatest number of young people and the economy as a whole to succeed. It’s not going to accomplish anything except continue to distort price signals and continue to drag down our struggling economy in which it is increasingly difficult for young people to start their careers.